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An industry concern manufactures three products known as P, Q and R. Each product is started in the machining area and completed in the Finishing
An industry concern manufactures three products known as P, Q and R. Each product is started in the machining area and completed in the Finishing Shop. The direct costs associated with each product forecast for the next trading period are: There are machines in both departments and machine hours required to complete one of each product are: Required: (a) An overhead absorption rate for fixed overheads using: (i) A labour hour rate for each department; (ii) A machine hour rate for each department. (b) Using results from (a) above, calculate the total cost of each product using: (i) The labour hour rate (ii) The machine hour rate. (c) Your comments to the Factory Manager who has suggested that one overhead rate for both departments would simplify matters. (d) Using the high-low method, calculate the variable cost per unit and total fixed overheads
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